Factsheet: Insurance

What is insurance?

Insurance covers the cost to replace things if something goes
wrong. For example:

your mobile phone falls out of your pocket and breaks while you
are travelling and you need to buy a new one

you have a car accident and need to pay for medical help and to
get your car fixed.

What is an insurance policy?

An insurance policy is a legal agreement where you pay money to
your insurer to cover the cost of replacing or repairing the things
you own if something goes wrong. To do this you pay what is called
a premium.

What is an insurer?

An insurer is a company selling the insurance. There are many
different insurers in Australia.

Types of insurance

Car insurance covers the costs for your car if you damage it or
if it is stolen.

Home insurance (building insurance) covers the cost to replace
things if something happens to your home (for example, damage from
a fire or a storm).

Contents insurance covers the cost to replace or fix the things
you have in your home, like furniture, clothes, appliances and
jewellery.

Life insurance pays a set amount of money when you die. The
money goes to the people you choose to receive the money (this is
written in your policy).

Travel insurance covers the cost for certain things if you get
in trouble when away from home. For example: if you get sick or
injured and need medical attention; if you lose something and have
to replace it; if something of yours is stolen and you need to
replace it; or if your travel plans are changed (for example, your
flight is cancelled).

Health insurance covers some of the amount of medical costs if
you are sick or injured.

Mobile phone insurance covers the cost for some things that can
happen to your phone (for example, if it stops working or you
damage it).

Remember

Insurance is money you pay in case things go wrong.

Insurance covers the cost to replace things if something
happens.

In Australia, there are some things you must have insurance
for, such as your car.

Euly and Apol move into their new home

Euly and Apol were excited to buy a new house. To get ready to
move into their new house, they bought a lot of new furniture and
appliances such as a television and fridge. They also had valuable
personal things like jewellery and a computer.

A friend of Apol's told him to get insurance because it covers
the cost to replace or repair things that are important to you, if
something goes wrong. Apol thought about the things that he and
Euly owned and how important they were to them.

Apol contacted two insurance companies to see how much it would
cost for an insurance policy. He knew that an insurance policy was
when he and an insurer agreed on what would be insured.

Each insurance company told Apol about something called an
excess. This is the amount Apol pays if he makes a claim. Apol knew
that a claim is when he asks his insurer to pay for something
covered by his insurance policy.

Apol and Euly decide to get home insurance (building insurance)
to cover the cost if they need to replace or fix their home. They
also buy another kind of insurance - contents insurance - to cover
the cost if the things inside their home get stolen or damaged.
These are things like their clothes, furniture, appliances and
computer.

Euly and Apol think about other types of insurance. Euly told
Apol about his friend's mum who has health insurance which is
helping her pay for some of her medical costs while she is
sick.

Euly and Apol are happy they have insurance for their home and
contents if something goes wrong. They are thinking about getting
medical insurance in the future.

Where to get more information

For more information about insurance, visit MoneySmart or call
1300 300 630.